The Final Months of the Section 1603 Tax Grant Program for Renewable Energy Projects


Last December, the Section 1603 Grant program was extended through 2011.  That program, implemented as an incentive to renewable energy developers, may award grants generally equal to 10% or 30% of the basis of development property, depending on the type of property installed.  The property in question must enter service in 2009, 2010, or 2011 to be eligible for the Section 1603 program.  Property placed in service after 2011 may also be eligible, but only if construction of that property began during 2009, 2010 or 2011.

Because the Section 1603 Grant program will not continue into 2012 (in spite of a confusing October 2012 application deadline), interested developers must begin project construction by December 31, 2011.  There are two ways to show that construction has begun:  (a) begin physical work of a significant nature 1; or (b) meet a 5% safe harbor threshold 2.  As stated above, applications must be submitted to the U.S. Department of the Treasury before October 1, 2012.  Additional information and application instructions may be found here

1 “Physical work of a significant nature” includes any physical work on the specified energy property at the site or the construction of property under a written contract provided the contract is entered into before the work takes place.  Preliminary work such as clearing land and obtaining permits is not physical work of a significant nature on specified energy property.

2 The safe harbor provision sets the beginning of construction at the point where the applicant has incurred or paid at least 5% of the total cost of the specified energy property, excluding land and certain preliminary planning activities.

This column is published for informational purposes only. It should not be construed as legal advice and is not intended to create an attorney client relationship. The views expressed are those of the author and do not necessarily reflect the views of the author’s law firm or its individual partners.

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